“Green Jobs”–The New Sub-Prime?

At dinner on Friday night I was talking with an intelligent young woman who seemed shocked at my suggestion that it is a bad idea for the government to subsidize the creation of “green jobs.” Given that it was a dinner conversation, I couldn’t get much farther than the observation that “you cannot create wealth by subsidizing the inefficient production of energy.” I’m afraid that her dismay would be shared by many relatively well-informed people.

This analogy might help to convey the danger lurking behind the friendly color green. In the London Times, Dominic Lawson writes: “Beware green jobs, the new sub-prime.” Lawson doesn’t fully develop the theme–he focuses mostly on electricity-powered automobiles–but these excerpts are suggestive:

Remember sub-prime mort-gages? Now universally excoriated as the spawn of the devil, the proximate cause of the credit crunch and all that followed, a few years back “sub-prime” was everyone’s darling. Financiers loved it because it generated sumptuously high-yielding debt instruments; governments, because it promised to make even the poor into proud property owners.

Now business lobbyists and governments on both sides of the Atlantic have got a new big idea. They call it “green jobs”. Leading the pack is, as you might expect, Barack Obama. The president recently defended a vast package of subsidies for renewable energy on the grounds that it would “create millions of additional jobs and entire new industries”. …

Electoral bribes apart, there is a more serious misconception behind the idea that ploughing subsidies into the “green economy” is a sure-fire way of boosting domestic employment. At best it will move people from one economic activity to another. Labour’s plans would subsidise car production workers to move from making conventional models to electric vehicles, which hardly anyone wants to buy. Osborne’s proposals would subsidise the double-glazing and home insulation industry and suck in many workers gainfully employed (without subsidy) elsewhere.

The key to a successful, wealth-generating economy is productivity. Saving energy is what businesses have done already, because it lowers their production costs. The problem with any form of subsidy is that it makes the consumer (through hidden taxes) pay to keep inherently uneconomic businesses “profitable”. …

Obama’s energy secretary, Steven Chu, had some soothing words for US manufacturing companies that complained that the new policy will make them even less competitive with Chinese exporters, since the people’s republic has indicated that it has no intention of inflicting a similar increase in energy costs on its own producers. He suggested that America might have to introduce some sort of “carbon-intensive” tariff on Chinese goods. One of China’s envoys, Li Gao, immediately retorted that such a carbon tariff would be a “disaster”, since it could lead to global trade war.

Actually, Mr Li is right: and this is how an achingly fashionable and well-intentioned plan to create “millions of new green jobs” could instead end up making the global economy even sicker than it is already.

“Green jobs”–every time you hear that phrase, grab your wallet and run.